What Making Tax Digital means for small business owners

March 14, 2017

Making Tax Digital is a government lead initiative to get all businesses submitting their tax returns online by 2020. The official description of it is;

“Making Tax Digital” is a government initiative that sets out a vision for ‘a transformed tax system and the end of the tax return‘ by 2020. The aim of the initiative is to make tax administration more effective, more efficient and easier for taxpayers, through the implementation of a fully digital tax system.” HMRC 2017

So, clear as mud!!!

Firstly, the deadline of 2020 which sounds way into the future is not as straightforward as it appears. Making Tax Digital will have a huge impact on small businesses before it will larger ones. We understand that the first quarterly updates will be required by non-VAT registered self-employed businesses and landlords with an accounting period starting after April 2018. All VAT-registered businesses will be brought in from April 2019 and companies from April 2020. So, that’s technically next year for some small businesses. Not so far into future now!

So, what exactly does a fully digital tax system mean? It means the days of receiving letters and statements from HMRC will be over and request for underpaid tax from years ago, should no longer happen. Every business and individual will have an online tax account where they can log on and see their complete financial tax in one place, in close to as real time as possible. Users will also be provided with prompts, advice and support through webchat and secure messaging.

Ok, so you’ll have an online account which you can access. The next thing to understand is how to submit your tax information digitally to HMRC in order to process your financial information. This is where cloud accountancy comes in.

The word cloud is used in many digital walks of life such as iCloud, Microsoft cloud, Amazon cloud etc. The definition of an online cloud is;

“Cloud storage is a cloud computing model in which data is stored on remote servers accessed from the Internet, or “cloud.” It is maintained, operated and managed by a cloud storage service provider on a storage servers that are built on virtualization techniques.

Cloud storage is also known as utility storage – a term subject to differentiation based on actual implementation and service delivery.”

Again, really crystal clear!

In language, we can all understand cloud accountancy software is a programme which you access via the internet on your phone, pc, laptop of tablet. It means you don’t have to install and maintain software on all your employee’s computers. As long as you have an internet connection, you’re good to go.

Below are just 5 reasons why using cloud accountancy software will benefit your business (we could give you more!)

You have a clear overview of your current financial position, in real-time.

Multi-user access makes it easy to collaborate online with your team and advisors.

Automatic updates mean you can spend more time doing what you love.

Everything is run online, so there’s nothing to install and everything is backed up automatically. Updates are free and instantly available.

Upfront business costs are reduced – version upgrades, maintenance, system administration costs and server failures are no longer issues. Instead, they are managed by the cloud service provider.

Now you understand the principal of cloud accountancy you need to choose a provider for your digital accounting

There are many different cloud accountancy providers but at The Profit Key we have chosen who we believe to be the market leaders to work with. These are;

So, my advice to you would be research. All of these companies provide excellent resources for selling their products. They all have YouTube channels with videos of their products in action along with many real customer’s testimonials. You can connect with them on social media and get to know if you feel their software is right for your business.

Or if that sounds too time consuming we offer a free meeting and free trial on all our cloud software systems. We understand this is going to be a big change for your business so in order to make sure it’s the right one we want to reduce any financial risk with a trial. We believe this is something every accountant should offer.

Once you have identified your provider the step in your digital journey is to train your employees to use the system. This is vital to ensure successful recording of you company finances. They need to know how to process invoices, pay bills, process receipts and submit tax information. Again, all major cloud providers have lots on online resources for this which are easily accessible. However, if you would prefer a face to face approach we offer free training.

So, that’s it! Not so scary when you break it down. Making Tax Digital is coming, it’s unavoidable but whilst moving to cloud accountancy will mean some extra work and cost to set up, afterwards you won’t look back. Your business will be saving time and money and giving you full control of the finances.

If you would like to trial one of our cloud software packages simply call us on 01530 416555 or email growth@theprofitkey.

Still not ready for a chat? Click here to have a look at our cloud software packages online

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